Target Reports Stronger Earnings After Cost Cuts and Job Losses

In a season dotted with notable earnings misses among retailers, Target bucked the industry trends by reporting strong earnings on Wednesday, its bottom line lifted by brisk sales of apparel and home goods as well as intensive cost-cutting.

The company reported adjusted earnings of $1.22 a share for the second quarter, beating analyst forecasts of $1.10 and the company’s own expected range of $1.04 to $1.14. Target’s stock rose 0.7 percent on Wednesday, to close at $80.87.

The company also said it would raise its annual outlook to earnings of $4.60 to $4.75 a share, compared with a previous forecast of $4.50 to $4.65 a share.

Sales at stores open for at least a year grew 2.4 percent, in line with company expectations. Online sales jumped 30 percent, contributing 0.6 percentage point to the sales increase, Target said.

The retailer’s cost-cutting drive appeared to be bearing fruit. Under Brian C. Cornell, who became chief executive last August, Target has begun an effort to save $2 billion over two years from corporate revamping, leaner supply chains and more efficient product sourcing.

In March, Target said it would cut several thousand jobs over two years, mostly at its Minneapolis headquarters, as it struggled to overcome a string of difficult years.

“We worked hard on our cost initiative,” Target’s chief financial officer, John Mulligan, who on Monday was promoted to the newly created role of chief operating officer, told reporters in a conference call. “We had great expense discipline across the team,” he said.

Still, Mr. Mulligan highlighted strong sales in the retailer’s signature categories, especially in apparel, where he said investments in product and store presentation had helped Target log strong gains in an area in which many rivals continue to struggle.

“Apparel has led the way all year for us,” Mr. Mulligan said. “We’ve made investments in store presentation. You can’t just slap up mannequins and expect people to buy things.”

Under Mr. Cornell and Mr. Mulligan, Target has taken some tough steps that analysts have said are necessary to get it back on track.

In January, Target announced that it would close its 133 stores in Canada and place its Canadian operation under bankruptcy protection. About 17,600 people lost their jobs in that failed expansion, which resulted in more than $2 billion in net losses since 2011.

That move, while painful, would allow Target to refocus its efforts on building up its business back home, Mr. Cornell said at the time.

Since then, Target has been overhauling its stores, focusing on fashion, babies’ and children’s goods and wellness to increase customer traffic. Those categories each grew more than 7 percent, a pace triple the retailer’s average, Mr. Mulligan said.

In June, Target agreed to sell its 1,500 in-store pharmacies to CVS Health, saying those locations should be run by a bigger and more experienced pharmacy operator. Analysts lauded the sale.

The big challenge, Mr. Cornell said in a separate call with investors, is to keep up that momentum in sales and traffic without resorting to major promotions.

Still, he said he was confident Target was focused on the right strategic priorities “because our guests are responding.”

One area of the store that Target has vowed to revamp, groceries, appeared to be taking more time.

Target announced this year that it would make its grocery aisles more like those of Whole Foods Market, with more organic and gluten-free fare, along with specialty yogurt, granola, coffee and tea, and wine and craft beer.

Lowe’s, meanwhile, joined the ranks of retailers delivering disappointing results in the second quarter, missing earnings expectations despite a healthy 4.5 percent rise in quarterly sales.

Lowe’s, the nation’s second-largest home improvement chain by sales, posted quarterly adjusted earnings of $1.20 a share, four cents short of analyst projections. Lowe’s kept its profit forecast for the full year unchanged at $3.29 a share.

Still, the strengthening housing market should continue to be a tailwind for the home improvement industry. On Tuesday, Lowe’s archrival Home Depot raised its profit forecast for the year after posting strong quarterly profits and sales.

A version of this article appears in print on , on Page B3 of the New York edition with the headline: Target Posts Profit Gains as Its Rivals Stumble. Order Reprints | Today’s Paper | Subscribe